Tuesday November 10th, 2020

Markets remain volatile as they contend with vaccine news, US stimulus, a contested US election, new election legal probes and EU tariffs. The positive vaccine news may have a negative impact for the prospect of a US stimulus as the news may reduce the pressure on US politicians to press for a new US Stimulus relief bill. The US attorney General told federal prosecutors to look into any “substantial” allegations of voting irregularities. The EU hit the US with US$4 bln in tariffs on US imports in retaliation for US subsidiaries for Boeing. Surging covid-19 cases across the US has seen hospitalization rates hit near record highs, as daily virus cases continue over 100k per day. The vaccine news saw investors returned to rising yields in US treasuries which generated fresh US$ buying demand yesterday. CNY continues to strengthen on the Biden victory up 0.3%, JPY up 0.15%, while Asian currencies are down 0.1% on average vs US$. Trading currencies remain volatile with NZD down 0.2%, MXN & AUD up 0.1%, NOK up 0.3 supported by oil prices and ZAR is down 1% vs US$. With no key economic data releases in the US markets will continue to focus on US election and vaccine updates.

Oil prices remain firm with vaccine hopes outweighing the lockdown impact on demand. OPEC said on Monday that the group could tweak their supply cut pact if demand slumps before the vaccine is available. C$ tested a fresh 2-year high of 1.2924 on the vaccine news and the spiking oil prices. C$ retreated after the initial vaccine-fueled surge ease with strengthening US$, C$ profit taking, and markets consolidated. Expect markets to remain volatile with US political uncertainty and vaccine news becoming a new driver. Support at 1.2924, if breached then 1.2778 (Oct2018) with resistance at 1.3100.

Euro drops aggressively with the German and European ZEW economic sentiment falling significantly below expectations. The positive news on a vaccine is somewhat offset as markets look at the logistical issues and timelines to deliver the vaccine to the general public. Political uncertainty within the US and ongoing covid-19 lockdowns will likely keep pressure on the Euro with the EU economy remaining under pressure. The new EU tariffs may provide a fresh focus point for the US President in his final months in office. Support at 1.1710 with resistance rebuilding at 1.1880.

GBP extends its gains hitting 2-month high amid vaccine hopes and upbeat UK data. UK Jobless claims surprised markets with a drop in jobless claims and a better-than-expected increase in wages. The House of Lords amended the controversial “Internal Markets Bill” and the focus shifts back to the PM to get his response. If the UK PM pushes the Bill through unamended, he could impact both the Brexit talks as well as the possible US/UK trade deal. Brexit remains the key short-term driver GBP. Support rises to 1.3160 with resistance at 1.3319 (sep4th), if breached look for possible extension to 1.3482 (Sep1st).